Strategically Delusional

Abstract

We aim to test the hypothesis that overconfidence arises as a strategy to influence others in social interactions. We design an experiment in which participants are incentivised either to form accurate beliefs about their performance at a test, or to convince a group of other participants that they performed well. We also vary participants’ ability to gather information about their performance. Our results provide, the different empirical links of von Hippel and Trivers’ (2011) theory of strategic overconfidence. First, we find that participants are more likely to overestimate their performance when they anticipate that they will try to persuade others. Second, when offered the possibility to gather information about their performance, they bias their information search in a manner conducive to receiving more positive feedback. Third, the increase in confidence generated by this motivated reasoning has a positive effect on their persuasiveness.

Keywords: Overconfidence, motivated cognition, self-deception, persuasion, information sampling, experiment

JEL Classification: C91, D03, D83